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Snyder stock falls sharply
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July 30, 1999: 2:27 p.m. ET
Investors sell after company says split into three will hurt earnings
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NEW YORK (CNNfn) - Shares of direct marketing and advertising firm Snyder Communications fell sharply Friday after the company said a planned spin-off of its health-care unit and Internet services business will cut into earnings for the rest of the year and in 2000.
The stock lost 7-5/16 to 19-3/4 in afternoon trading.
After releasing second-quarter earnings results late Thursday that matched expectations and showed a strong 32 percent growth in net income, company officials said in a conference call that they expect second-half 1999 and full-year 2000 results to be lower than anticipated. They cited business development and other costs associated with its planned breakup into three companies.
Analysts had expected 1999 earnings per-share to total $1.41 per share and 2000 profits to come in at $1.85 per share for the combined company, according to the consensus estimate reported by the First Call Corp. Merrill Lynch on Friday lowered its estimates to $1.15 per share for 1999 and to $1.45 for next year.
Several months ago Snyder (SNC) announced plans to separate Snyder Healthcare Services, a sales, marketing and medical education business that will be renamed Ventiv Health Inc., and to create a tracking stock for its circle.com Internet unit, which manages Internet systems for corporate clients. The tracking stock provides a way to measure and value its Web properties without actually spinning them off as a separate company.
Performance of Snyder Communications
over the past year.
"It makes sense to split up into three businesses -- I think everyone agrees with that strategy and applauds it," said George Shipp, senior vice president at Scott & Stringfellow, which lowered its rating on the stock Friday to a "long-term buy," from a "strong buy."
But, he said, many investors are selling their shares because the company has decided to sacrifice short-term earnings for future growth.
"It's your classic short-term, long-term kind of debate," he said.
Snyder hopes to complete the restructuring by the end of September, pending shareholder and regulatory approval.
Snyder earned $23.3 million, or 31 cents per diluted share, on a pro forma basis in the second quarter, on target with the First Call estimate. That compares with pro forma earnings of $17.7 million, or 25 cents per share, a year earlier.
The direct marketing business has annual revenues of about $575 million, while the health-care segment generates revenues of about $400 million each year.
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Snyder Communications
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